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Novelty-seeking traits and development

When we compare the economic performance of former colonies with high European populations (e.g. Australia) to those without one (e.g. most African and Latin American countries), we can see that the former are generally more successful. One reason behind this is that Europeans already knew how to make an economy successful when they settled down in those colonies. They then transferred this knowledge to their offspring. Such an intergenerational transmission of traits that are favorable to development was missing in colonies with few Europeans.

One question that may arise is what kind of knowledge/traits are we talking about here? And is it transmitted genetically or culturally? Of course, economic development has many other determinants, but such intergenerationally transmittable traits are very important as well. In this post, I’ll look at the case of novelty-seeking traits: that is whether one likes to explore and try new things.

In an earlier post, I already talked about a similar idea: in hunting-gathering times, places with higher climatic volatility forced their inhabitants to experiment with new methods of food production/processing. Thanks to this experimentation, populations in such places accumulated more ecological knowledge over time, and this helped them adopt agriculture earlier, which correlates with current development levels.

This article is based on a working paper by Goeren (2015). The underlying idea is similar, but we are looking at it from a slightly different perspective. The setup is as follows: suppose the fraction of people in an economy that does exploration/research depends on two things: biogeographical characteristics and the prevalence of novelty-seeking traits.

The first one refers to things such as climate, geography, the availability of domesticable animals, etc. The second one is self-explanatory. Goeren assumes that the fraction of people doing exploration is increasing in both of these arguments. For biogeographical factors, this can simply be interpreted as: the harsher the environment is, the more (mental) resources need to be invested in figuring out how to survive.

The level of technology in the economy then depends on the fraction of people involved in exploration. More inventive people obviously mean better technology. But of course, the economy needs to produce consumption goods as well. This is done by the people who are not involved in exploration.

It is then quite easy to see that this model implies a trade-off: the more people do exploration, the more technologically advanced the economy is; but at the same time, fewer people are involved in production, which results in lower consumption and hence a lower GDP.

Within the framework of this model, Goeren shows that in fact we have a hump-shaped relationship between novelty-seeking traits and development. This is driven by the trade-off described above. A high prevalence of novelty-seeking traits increases the fraction of people doing exploration, which is initially good for the economy (because of technological advancements), but if the prevalence of novelty-seeking traits rises too high, too many people are diverted from production to exploration, which is bad for growth.

The author then proceeds to test this claim empirically. He uses data on the DRD4 gene, which is supposedly associated with novelty-seeking traits. He goes on to show that novelty-seeking traits as proxied by this gene indeed have a hump-shaped effect on per-capita incomes in 2000. This is significant even after controlling for a wide range of characteristics (basically, anything you can think of).

While I’m not a biologist it seems to me that studies on the association between DRD4 and novelty-seeking traits are far from conclusive. Meta analyses havetrouble finding a strong link. Though it is true that some link may exist, DRD4 probably only explains a small part of the variation in novelty-seeking traits across humans.

Furthermore, the author uses a measure that is effectively a Herfindahl index of how much DRD4 can differ within a given population. So he seems to measure genetic diversity using this particular gene.

Putting all this together, I’m not really convinced that the empirical findings are evidence for the relationship between novelty-seeking traits per se and economic development. To me, it’s more of a confirmation of the hump-shaped relationship between diversity (as proxied by diversity on the DRD4 gene here) and development.

Interestingly though, the results still hold after controlling for ethnic diversity (although ethnic diversity as a control is not significant). But it must be noted that diversity can be defined in a multitude of ways, so it is possible that DRD4 diversity picks up some kind of diversity that is not well proxied by ethnic diversity.

So in my opinion, while the empirical results are nice and they are for sure useful, they do not necessarily lend credence to the novelty-seeking theory put forward by the author. Still both the theory and the empirical findings of this paper are quite interesting; even if they may not be looking at the exact same thing.